Homeowner's Insurance Deductible

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
Bimmer
Posts: 215
Joined: Tue Mar 06, 2007 9:33 pm

Homeowner's Insurance Deductible

Post by Bimmer »

My homeowner's insurance cost keeps going up and is quite high. I checked today, and my deductible was set at $1000. Increasing it to $2000 reduced my premium by about $250 per year, so I made that change today. $1000 difference would not be significant. Increasing my deductible to $5000 (which in reality would not be a hardship) would reduce my premium another $500 per year. I have not made a homeowners claim in 16 years of homeownership. But it would take 6 extra years to recoup one deductible if I had a claim.

Where do you have you homeowner's deductible set? Anyone keep theirs as high as $5000?

Thanks.

-Bimmer
____________________________ | Bimmer | ____________________________
User avatar
whodidntante
Posts: 13114
Joined: Thu Jan 21, 2016 10:11 pm
Location: outside the echo chamber

Re: Homeowner's Insurance Deductible

Post by whodidntante »

I have mine at $2,500. To me, that's a good balance between insurance kicking in when I would want it to and my premiums. I also shake my agent's tree now and then and I'm perfectly willing to go if he won't provide me with the best price among insurers of similar quality. I could arguably drop the policy and from a pure expected value perspective I should, but I consider it reasonable protection for the price.
runner3081
Posts: 5993
Joined: Mon Aug 22, 2016 3:22 pm

Re: Homeowner's Insurance Deductible

Post by runner3081 »

We are at 10K. Plenty of emergency fund to cover it and it prevents us from filing a claim unless it is a bad situation.
User avatar
ResearchMed
Posts: 16795
Joined: Fri Dec 26, 2008 10:25 pm

Re: Homeowner's Insurance Deductible

Post by ResearchMed »

Bimmer wrote: Tue Jul 13, 2021 9:34 pm My homeowner's insurance cost keeps going up and is quite high. I checked today, and my deductible was set at $1000. Increasing it to $2000 reduced my premium by about $250 per year, so I made that change today. $1000 difference would not be significant. Increasing my deductible to $5000 (which in reality would not be a hardship) would reduce my premium another $500 per year. I have not made a homeowners claim in 16 years of homeownership. But it would take 6 extra years to recoup one deductible if I had a claim.

Where do you have you homeowner's deductible set? Anyone keep theirs as high as $5000?

Thanks.

-Bimmer
We have a high deductible.

Also keep in mind that you might not even want to make a claim for something that is, say, $6-7k ($1-2k above deductible) or such. There's not a big payoff, and your claims history would be dinged. You might find rates increased or be dropped altogether. So that's another consideration: What type/size of claim would you actually make?
(Yes, regardless of deductible, one still might not want to file a claim that is for an amount just a bit over that deductible.)

RM
This signature is a placebo. You are in the control group.
michaeljc70
Posts: 10843
Joined: Thu Oct 15, 2015 3:53 pm

Re: Homeowner's Insurance Deductible

Post by michaeljc70 »

I have it at $1k. It is $700/yr, so I doubt upping it to $2000 or $2500 would save much otherwise I'd do it.
User avatar
jeffyscott
Posts: 13486
Joined: Tue Feb 27, 2007 8:12 am

Re: Homeowner's Insurance Deductible

Post by jeffyscott »

We had $5000 some time ago and would've kept it there, but new insurer was so cheap it was not worth going below $2000. At that time, I think the quote was only about $50 less per year and had a comment about it reflecting a minimum charge or something like that.

If I could save $500 per year by going to $5000, I would do it. Since our total annual homeowner's insurance is $463, I'm guessing my discount would be still be substantially less than that :D .

We have had one claim for about $10K (10+ years ago) in 35 years of home ownership (it was for hail damage).
talzara
Posts: 4745
Joined: Thu Feb 12, 2009 6:40 pm

Re: Homeowner's Insurance Deductible

Post by talzara »

Bimmer wrote: Tue Jul 13, 2021 9:34 pm Increasing my deductible to $5000 (which in reality would not be a hardship) would reduce my premium another $500 per year. I have not made a homeowners claim in 16 years of homeownership. But it would take 6 extra years to recoup one deductible if I had a claim.
Homeowners insurance has an annual claim frequency of 6%. The average house has a claim filed every 16 years.

If the premium reduction will pay for the deductible in 6 years, then the insurer believes that your house is much riskier than average. If it is not, then taking the higher deductible would be a very good deal for you.

You could go a lot higher than $5,000. Fannie Mae allows percentage deductibles of up to 5% on conforming mortgages.
WhyNotUs
Posts: 2610
Joined: Sun Apr 14, 2013 11:38 am

Re: Homeowner's Insurance Deductible

Post by WhyNotUs »

$2,500
I own the next hot stock- VTSAX
Gill
Posts: 8221
Joined: Sun Mar 04, 2007 7:38 pm
Location: Florida

Re: Homeowner's Insurance Deductible

Post by Gill »

In Florida there is a special hurricane deductible distinct from the normal casualty deductible. Without digging out my policy, I believe mine is about $35,000 (not a typo). Without a large deductible, hurricane coverage on the Florida coasts is absolutely prohibitive.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
softwaregeek
Posts: 951
Joined: Wed May 08, 2019 8:59 pm

Re: Homeowner's Insurance Deductible

Post by softwaregeek »

5k. Worried about rate increases if I file a claim so I set it high. I can pay 5k without issue.
User avatar
BolderBoy
Posts: 6753
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Homeowner's Insurance Deductible

Post by BolderBoy »

I have Chubb Insurance. They let me pick my own deductible. But Chubb chooses a deductible that applies to the most common hazard faced by me in my location - wind and hail.

I chose $2500 for my deductible and Chubb chose $6500ish for the specific deductibles.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
cleosdad
Posts: 310
Joined: Sat Feb 02, 2008 8:32 am
Location: Littleton Co

Re: Homeowner's Insurance Deductible

Post by cleosdad »

BolderBoy wrote: Thu Jul 15, 2021 9:43 am I have Chubb Insurance. They let me pick my own deductible. But Chubb chooses a deductible that applies to the most common hazard faced by me in my location - wind and hail.

I chose $2500 for my deductible and Chubb chose $6500ish for the specific deductibles.
Hi Bolderboy. I live in Littleton and would like to know why you chose Chubb. I used to have Amica but they doubled my premium because roof was over 15 years and now have Safeco but just looking around. Thanks, Tim
Lalamimi
Posts: 1209
Joined: Mon Jun 24, 2019 4:22 pm
Location: Texas

Re: Homeowner's Insurance Deductible

Post by Lalamimi »

Ours is 1% of our coverage, but increases to 5% for claims from a Named Storm. Keeps our premium down.
shell921
Posts: 623
Joined: Fri Jul 06, 2018 5:13 pm

Re: Homeowner's Insurance Deductible

Post by shell921 »

I have homeowners through Pacific Specialty and am not sure what my deductible is. Will have to check. I also have earthquake
insurance through a different company and my deductible for that is $250k !
Living Free
Posts: 822
Joined: Thu Jul 19, 2018 7:31 pm

Re: Homeowner's Insurance Deductible

Post by Living Free »

I have mine set at around $7-8k. I'm a big fan of high deductibles and self insuring for smaller things when feasible. Helps keep the premiums lower and also lowers the risk of being dropped by insurers or having them jack up one's rates.
Topic Author
Bimmer
Posts: 215
Joined: Tue Mar 06, 2007 9:33 pm

Re: Homeowner's Insurance Deductible

Post by Bimmer »

Thanks for all the replies. I use USAA and total yearly cost to insure my home (worth approx. 1.5M) is $3662.86 with the $2000 deductible. I will call them tomorrow to increase the deductible to $5000 to reduce my premium to just over $3100 and see what the next option up is!

I have all my policies with USAA - including large umbrella. Have been afraid to leave, as the service has been excellent on some smaller motor vehicle claims. I also feel like there is less likelihood of just being dropped by USAA than other insurers, but I'm not sure if this is really true.

Any suggestions on getting over fear of leaving USAA and shopping around?

Thanks.

-Bimmer
____________________________ | Bimmer | ____________________________
tj
Posts: 9368
Joined: Wed Dec 23, 2009 11:10 pm

Re: Homeowner's Insurance Deductible

Post by tj »

Bimmer wrote: Sat Jul 17, 2021 9:26 pm Thanks for all the replies. I use USAA and total yearly cost to insure my home (worth approx. 1.5M) is $3662.86 with the $2000 deductible. I will call them tomorrow to increase the deductible to $5000 to reduce my premium to just over $3100 and see what the next option up is!

I have all my policies with USAA - including large umbrella. Have been afraid to leave, as the service has been excellent on some smaller motor vehicle claims. I also feel like there is less likelihood of just being dropped by USAA than other insurers, but I'm not sure if this is really true.

Any suggestions on getting over fear of leaving USAA and shopping around?

Thanks.

-Bimmer
I can say this. I did have one auto claim with USAA and they weren't super punishing with my rates afterwards. They paid out like $3k for repairs to another car and like $3k for mine. When I first moved to Arizona, some agents couldn't believe what my rates were with the prior claim. USAA seemed really expensive on my condo insurance in AZ.

I moved to Hawaii and USAA had amazing rates. When I moved back to Arizona, the accident had fallen off by then and I went to Auto Owners and they seemed good, but I had no claims. I moved to California where Auto Owners doesn't operate and went back to USAA - amazing rates.

There are other quality insurers out there. I was happy with Auto Owners, but I had no claims.

You can always leave USAA and go back if you go to a state where they are more competitive.
User avatar
Alto Astral
Posts: 970
Joined: Thu Oct 08, 2009 10:47 am

Re: Homeowner's Insurance Deductible

Post by Alto Astral »

Bimmer wrote: Tue Jul 13, 2021 9:34 pm Where do you have you homeowner's deductible set? Anyone keep theirs as high as $5000?
I have a $5K deductible with 2.4K annual premium with Amica. If I increase the deductible to $10K, I save only $100 in annual premium.
Chuckles960
Posts: 920
Joined: Thu May 13, 2021 12:09 pm

Re: Homeowner's Insurance Deductible

Post by Chuckles960 »

Bimmer wrote: Tue Jul 13, 2021 9:34 pm My homeowner's insurance cost keeps going up and is quite high. I checked today, and my deductible was set at $1000. Increasing it to $2000 reduced my premium by about $250 per year, so I made that change today. $1000 difference would not be significant. Increasing my deductible to $5000 (which in reality would not be a hardship) would reduce my premium another $500 per year. I have not made a homeowners claim in 16 years of homeownership. But it would take 6 extra years to recoup one deductible if I had a claim.
That you have not had a claim in 16 years is not really predictive; something could happen tomorrow. Insurance is to protect you against unpredictable + unaffordable expenses. If you can afford to self-insure for the first $5000, it is always a good idea to do so, because insurance is never a good deal on average (the companies make money so clients lose money---on average).

You might also look at your car insurance to see if it would help to raise the deductible as high as you can afford to self-insure for. And do you really need comp?
afan
Posts: 8193
Joined: Sun Jul 25, 2010 4:01 pm

Re: Homeowner's Insurance Deductible

Post by afan »

We have $10,000 deductible. I would be fine with higher, but there was little drop in premium for going above that. I should probably check again about whether we can save by going to 25k.
I view it as catastrophic coverage. I would hesitate to file a claim for $15k ($5k net after deductible). I would probably self insure for the $5k instead.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
User avatar
ResearchMed
Posts: 16795
Joined: Fri Dec 26, 2008 10:25 pm

Re: Homeowner's Insurance Deductible

Post by ResearchMed »

afan wrote: Wed Jul 28, 2021 1:19 pm We have $10,000 deductible. I would be fine with higher, but there was little drop in premium for going above that. I should probably check again about whether we can save by going to 25k.
I view it as catastrophic coverage. I would hesitate to file a claim for $15k ($5k net after deductible). I would probably self insure for the $5k instead.
This is the problem we have, and I mentioned briefly above.

And it's regardless of how high one's deductible is: How much "more than the deductible" would the cost be for one to file a claim?

Obviously, with some trivial amount over the deductible, one presumably wouldn't file a claim and thus risk higher rates or cancellation in the future if there were a "second" claim, one for much more. Better to have *that* one be a first claim, etc.

So in the example from afan, why not save money and just get a $15k deductible?
That may be answered for one, if there is a much higher amount as the "next available" deductible amount offered by the insurer.
And if the savings are trivial/meaningless, then... I suppose keep the $10k (in this example), but do as afan is doing, and act as though there is a much higher deductible.

But it's a "how many hairs make a beard" question. At what point would one file a claim?
Setting a higher deductible doesn't really affect this decision, but it *does* make it less frequent due to more potential claims not being above a high deductible in the first place.

Does anyone have any suggestions about how to deal with this decision, other than "whatever seems right at the time"?
I suppose one thing would be whether there is any or much likelihood that the damages - and thus costs - might end up being considerably more than originally expected/estimated. If so, it probably would have been good to have an insurance adjuster take a look at the initial situation, pre-semi-repair state of the damage. But asking for someone to take a look probably ticks a box at the insurer even if no claim is filed.

RM
This signature is a placebo. You are in the control group.
afan
Posts: 8193
Joined: Sun Jul 25, 2010 4:01 pm

Re: Homeowner's Insurance Deductible

Post by afan »

Last time I checked, I looked at $25,000. It was only slightly less than a $10k deductible. So I went with 10.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
User avatar
ClevrChico
Posts: 3259
Joined: Tue Apr 03, 2012 8:24 pm

Re: Homeowner's Insurance Deductible

Post by ClevrChico »

$25k, no mortgage, modest house. I'd rather put my premium dollars into covering liability.
Lalamimi
Posts: 1209
Joined: Mon Jun 24, 2019 4:22 pm
Location: Texas

Re: Homeowner's Insurance Deductible

Post by Lalamimi »

Ours is 1% of coverage, so $3750. But We have named storm deductible of 5%. Keeps our premium at $1700 a year. Brokers can't beat it. Allstate in Texas.
Post Reply